Budgeting and forecasting are two of the most important tasks you can do for your business. They are also two tasks people rarely look forward to. Taking the time to make an actionable budget and to properly forecast can mean the difference between failure and success for your company.
When done poorly, budgets and forecasts not only become useless, but they also become highly misleading. When done well, however, both your budget and your forecast become indispensable tools for business and can help guide you toward achieving your goals and meeting your highest expectations.
Provides Clear Actionable Steps
A well-crafted budget is an action plan that each member of the team can follow. It’s more than just a list of expected incomes and expenditures. It’s a clear, concrete plan for achieving expected revenue or profit goals and overcoming possible challenges and setbacks.
Within your budget, do not just include what you expect to achieve by this time next year, explain in a clear step by step process how you expect to achieve it. Delegate specific tasks to each person so that everyone is helping make these expectations a reality. Without a clear plan of action, your budget is essentially nothing more than wishful thinking.
Synthesizes Data and Reveals Trends
Thorough forecasting allows you to take all of the vast amounts of data about the previous quarter or month and compile them into meaningful information that you can then use to reveal important trends in your company. If compiling all of that data together sounds like a daunting task to you, don’t worry, you can find affordable and intuitive budgeting and forecasting software that makes the process much simpler and more manageable.
Through this synthesis of data, you can find out what is and is not working in your company. You can also easily see whether or not you are on track and pinpoint exactly where things are beginning to go astray. Data is only useful inasmuch as you can interpret and use it. The right forecasting tools and the right method can help you get the absolute most out of the rich data you have available.
Helps Your Company Stay on Track to Meet Goals
Even if you have created the absolute dream budget to guide your company toward its goals, you won’t make it to the finish line without regularly monitoring your progress. You can’t just finalize the budget and then ignore it until the same time next year.
With regularly forecasting, you can monitor your company’s progress and make sure you are still on track to meet your end of the year goals. To be most effective, forecasting should be done on a quarterly or even monthly basis. At these times, you can use the synthesized data and trends to make any minor (or major) tweaks necessary to your budget so that it continues to be relevant and realistic.
Allows You to Detect Potential Problems or Challenges Early
Via synthesized data and regular forecasting, you can catch problems and challenges early on before they become serious threats to the company. This can potentially help you save a lot of money and stress by minimizing the damage caused when your company encounters inevitable problems and setbacks. This is why effective and accurate forecasting should be done on a quarterly or even monthly basis.
Keeps Everyone Moving in the Same Direction
Through the combined powers of excellent, precision budgeting and forecasting, you’ll be able to easily make sure everyone is on the same page. That means everyone knows exactly what their collective goals for the company are in the coming yearand how they can contribute to achieving those goals according to their designated role(s).
Without an effective budget, people may onlyget a vague sense of what your company goals are—i.e. “do better than you did last year.” Everyone will be doing their own thing and working toward their own idea of what your company’s goals should be. With everyone pulling the company in different directions, you can’t possibly expect to meet your end-of-year goals. A clear budget keeps everyone on the same page and moving in the right direction so that your company can build momentum and continue to meet its expectations each year.